Vivendi buys USA assets for $10.3 bln

Diller will head new entity that includes Universal studios

LOS ANGELES (CBS.MW) - Vivendi Universal on Monday said it was buying USA Networks film and television assets in a cash-and-stock deal worth around $10.3 billion.

Vivendi Chief Executive Jean-Marie Messier said that acquistion, coupled with its recent alliance with satellite broadcaster Echostar
DISH, -1.55%
"fully addresses Vivendi Universal's needs in terms of integration and distribution on the U.S. market."

Vivendi
V, -0.18%
(012777) shares rose over 3 percent in Paris Monday. The company is anticipating that the deal will boost earnings before interest, taxes, depreciation and amortization in 2002 by 600 million euros, or by a 10 percent increase over the current average estimate from the analysts.

The deal has been under consideration for almost a year; final agreement was reached on Thanksgiving Day; and the combined entity will be called VU Entertainment, or VUE, Messier told a press conference in New York Monday morning.

"It is the simplest [deal] you can imagine," Messier said, for "a time of integration and consolidation."

U.S.-listed shares of the French behemoth closed up $3.15, or 6.4 percent, to $52.10 Monday; USA added $1.20, 5 percent, to $25.02.

As part of the deal, USA chief Barry Diller will become chairman and chief executive of a new group called Universal Entertainment Group, which will be the umbrella group that will oversee the USA Networks
USAI
and Universal studio operations. Diller also will remain in charge of a separate company called USA Interactive, which includes the company's Ticketmaster and other online operations.

Reunited

The deal reunites Universal and USA, units that were separated and sold to Diller for $4 billion three years ago by Universal's then parent, Seagram Co. Now Diller is selling them back at more than double the price and retains control over them in what he called "an early repatriation" of assets.

Vivendi Chairman and Chief Executive Jean-Marie Messier is trying to round out the Universal operations he acquired from Seagram
SGCYP
a year ago by giving them a little more distribution clout.

Messier, who has moved from Paris to New York, also is trying to gain more respect on Wall Street. Speculation has it that Diller will go a long way to giving him that respect; Diller long has been considered a Wall Street darling.

There is some concern, however, that Diller's arrival will ruffle the feathers of Universal Studios chief Ron Meyer and Universal Pictures chair Stacey Snider. The two have turned the studio around and put together a string of formidable hits over the last 18 months, including "Meet The Parents," "Dr. Seuss's How The Grinch Stole Christmas," "The Mummy Returns" and "The Fast And The Furious."

Meyer and Snider, however, are expected to remain at their posts. Michael Jackson, chairman and chief executive of USA's entertainment group, is expected to help with integration issues. And Pierre Lescure will remain as co-chief executive of Vivendi Universal.

Diller on Sunday tried to sooth concerns that he will disrupt the winning ways at Universal Studios.

"The executives of Universal, and in particular, Ron Meyer and Stacey Snider are first rate, doing first rate jobs and while I'm sure I'll have opinions, I intend to join their fine culture rather than imposing my own," Diller said in his statement.

Diller also said he will serve "at the pleasure of both Mr. Messier and myself. I will have no employment contract. I will be paid no salary."

Diller went on to say that he has "gained enormous respect" for what Messier is trying to accomplish. He later added that the controversy over the premium Vivendi is paying compared with what Seagram and former chairman Edgar Bronfman sold the assets for is "hogwash."

"What Mr. Bronfman did was to sell his television assets to HSN Inc. (Diller's Home Shopping Network, the precursor to USA) for what then was a full and fair price with the hope, clearly stated at the time, that they would grow in value better than they could inside Seagram ... and, with absolute certainty, be repatriated back to the company," Diller went on to say.

Addressing concerns that Diller would not control his own operation anymore, Diller pointed out he still will be in charge of USA's interactive businesses, which now will be called USA Interactive. The company, which includes the flagship Home Shopping Network, Ticketmaster, Citysearch and the pending acquisition of travel service Expedia, will have $4.3 billion in sales and $620 million in cash flow.

Last year, USA Networks hauled in about $1.2 billion in media revenue, according to Advertising Age, a nearly 17 percent increase over 1999. It ranks at No. 28 on the list of the top 100 media companies, sandwiched between privately-held International Data Group and McClatchy Co.
MNI, -1.69%

Vivendi, the world's second-largest media company, hopes the move will increase its footprint and make it more competitive with AOL Time Warner
AOL
Walt Disney
DIS, +1.43%
and Viacom
VIA, -0.35%

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